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Wall Street is braced for what could be a volatile trading day after Facebook-parent Meta delivered a disappointing outlook for Q2 2024 and significantly raised its expected capital expenditures.
Meta reported after the market close yesterday and its stock took a sharp nosedive on the after hours market despite posting better-than-expected Q1 2024 results. Meta’s estimated expenditures are in part being directed toward its “ambitious AI research and product development efforts” which will likely take several years before generating significant revenue, according to CEO Mark Zuckerberg.
Zuckerberg also aims to keep funding the company’s “metaverse” ambitions. Keep in mind, Meta has poured billions into its various metaverse projects with little to show for it outside a string of losses in its Reality Labs division. That division, which also oversees VR headsets and Meta’s Ray-Ban smart glasses, reported a loss of -$3.85 billion for Q1 2024, which follows an annual loss of more than -$16 billion in 2023. Meaning Wall Street’s concerns about Meta’s massive investments may have more to due with the company’s track record rather than doubts about AI.
Tech bulls still have high hopes that AI-related news from other big tech firms will prove to be a major catalyst in the days and weeks ahead.
Today, Google-parent Alphabet and Microsoft are the spotlight with both releasing results after the close. Microsoft is of particular interest thanks to its partnership with ChatGPT maker OpenAI which has allowed it to move faster than other tech firms that are rushing to incorporate the technology.
Importantly, Microsoft is expected to provide details on how its AI projects are impacting the company’s revenue, which could be a boom to tech bulls if the news is as good as expected.
Other earnings are due today from Altria, AstraZeneca, AvalonBay Communities, BASF, Bristol Myers Squibb, Capital One Financial, Carrier Global, Caterpillar, Comcast, Dow, Edwards Lifesciences, Gilead Sciences, Honeywell International, Intel, KLA, Merck & Co., Nasdaq, Northrop Grumman, Royal Caribbean Cruises, Sanofi, S&P Global, Southern Copper, TMobile, TotalEnergies, Tractor Supply Co., Union Pacific, and Valero Energy.
Investors today are also anxious to se the first estimate for Q1 2024 GDP (gross domestic product). Wall Street is expecting the annual growth rate to slow to +2.3% for the quarter versus +3.4% in Q4 2023.
Other data today includes the Kansas City Fed Manufacturing Index, Pending Home Sales, and advance reads on Retail Inventories, Wholesale Inventories, and International Trade.
Keep in mind, at the beginning of 2022 the 2-year Treasury Yields were trading sub-1.0%, this week the 2-Year Treasury is knocking on the door of 5.0% and the stock market is decidedly higher, who would have ever guessed? The 10-Year Treasury is now yielding over 4.6%. Maybe I'm just getting old, but I continue to like being under-invested in the stock market and over-invested in cash in the bank earning +5.0%.
NEW Rules for Airlines... They Must Now Pay You Back for Flight Cancelations, Long Delays, Lost Luggage, etc... Airlines will soon be required to pay you back if they cancel your flight, delay you, make major changes to the itinerary, or don’t deliver your checked bags on time. The change was made official Wednesday when the Department of Transportation issued a final rule. “Passengers deserve to get their money back when an airline owes them — without headaches or haggling,” Transportation Secretary Pete Buttigieg said in a written announcement of the new standards. The refunds will need to be offered in cash or straight back to your form of payment — vouchers don’t count. Airlines will also be required to issue the refunds quickly, and “without passengers having to explicitly request them or jump through hoops,” according to the DOT guidance. If your flight is canceled, you’ll be entitled to a full refund. If you’d rather be rebooked to your destination, you can also choose to accept another flight, travel credit or alternative transportation offered by the airline. It doesn’t make a difference if the flight was canceled due to technical issues, weather, or anything else. Buttigieg told CNN the requirement applies “when your flight is canceled for any reason.” If your flight is delayed or changed… The new rule also requires airlines to offer refunds when a flight itinerary is “significantly changed.” That means you can opt to get your money back if your departure or arrival time is changed by 3 hours or more on domestic flights, or 6 hours on international flights. Source The Hill
PGA Tour Releases Massive 'Loyalty' Payouts: The loyalty shown by Tiger Woods, Rory McIlroy and other star golfers to the PGA Tour was officially rewarded yesterday. Woods is set to receive $100 million in equity as part of the newly created for-profit PGA Tour Enterprises with McIlroy obtaining about half as much equity, according to the Telegraph. The stakes being awarded to Woods, McIlroy and other PGA Tour stars are part of a make-good by the league to thank players for sticking by its side rather than leave for big-money contracts from LIV Golf. Earlier this year, PGA Tour Enterprises received an investment of up to $3 billion from Strategic Sports Group, a high-profile assortment of billionaire sports owners. Payouts are being handed to players based on a variety of factors, including career success and cultural popularity. Several hundred players will receive stakes, though the majority of that equity, up to $750 million, will go to the top 36 players as determined by an undisclosed formula that takes into consideration the aforementioned factors, among others. It'll be interesting to see how all this plays out in light of trying to bring the two tours together. There is definitely a lot of chiming on both sides about whose product is better, but the one thing that needs to happen to keep TV ratings up is to make sure everyone has access to the four majors played on the tour. Source CBS Sports
Interesting... Kids Making Thousands Selling "Reservations" - Appointment Trader is a platform that enables individuals to exchange reservations for restaurants, hotels, bars, and some government agencies through an online marketplace. The company was founded by Jonas Frey in 2021 and kids all over the country are making money by selling their reservations. Crazy!!! Frey conceived the idea for Appointment Trader out of personal frustration when attempting to secure an appointment at a high-demand motor-vehicle registration government facility in Nevada. Initially, the website primarily served as a platform for swapping and selling appointments at the Department of Motor Vehicles. Now the platform is doing millions in business as it allows people to sell reservations at some of the toughest and most in-demand restaurants and hotels in the world. Source Appointment Trader
Metals Are Back as Big Energy Traders Jump Back In: Some of the world’s biggest energy trading companies are returning to metals, years after getting burnt in the notoriously difficult markets. Vitol Group, Gunvor Group and Mercuria Energy Group are among the traders building out their metals teams, as they look to deploy capital generated by record profits. The shift comes as forecasters turn increasingly bullish on copper, aluminum and other metals, where long-anticipated production shortfalls are starting to take shape. Many commodities houses also see strong links between metals usage and power markets — another growth area for traders. “For the oil traders, there’s a whole energy transition story, but they’ve also got the cash to take significant positions,” said Kristofer Tremaine, chief executive officer of Kimura Capital, a lender to the commodities sector. Their arrival could challenge smaller-scale metals traders, which have struggled to turn a profit in recent years as soaring energy prices and supply chain disruptions crimped demand from manufacturers. The early signs are that the new players are betting on bulk, with bigger volumes a good fit for the large-scale transportation networks of firms that move millions of barrels of oil per day. Source Bloomberg
Main Street Banking Model Is Being Squeezed: Higher-for-longer interest rates are continuing to weigh on Main Street banks. Regional banks posted steep profit declines in the first quarter and predicted more pain ahead. The results underscore the uneven toll that two years of higher interest rates have taken on regional banks, which tend to have plain-vanilla businesses taking in deposits and making loans. That model has become less profitable because of the pressure to pay up on deposits. Profit fell by more than a fifth from a year earlier at U.S. Bancorp, Truist Financial, and M&T Bank, and by around a third or more at Citizens Fianncial Group, KeyCrop, and Huntingtion Bancshares. At Comerica, profit declined by more than half. At the biggest banks this quarter, rate pressure began to emerge, but profits were down much less overall. One bright spot for some regional banks: a rebound in fee businesses such as wealth management, treasury management and investment banking. However, significant fee businesses are few and far between across the nation’s more than 4,500 regional and community banks. And compared with the giant fee businesses of megabanks such as JPMorgan Chase, those that exist are tiny. Source WSJ
ICE Rebuffs Request to Introduce Price Limits on Cocoa Futures: Intercontinental Exchange Inc. refused a request to introduce daily price limits on cocoa after futures surged this year, according to people familiar with the matter. In a meeting with traders, the exchange argued such limits — commonplace in cotton and grain markets — would make it harder to liquidate positions if needed, said the people, who asked not to be identified discussing private talks. Most participants agreed, the people said. Cocoa prices have more than doubled this year, breaking record after record as output was hit by bad weather and rampant crop disease in West Africa, which accounts for more than half of global supply. Futures in New York recently topped the $12,000-a-ton mark, making the beans more expensive than copper. Brokers and clearers mostly agreed with the exchange, partly on concern they may be forced to liquidate a client’s position if companies failed or defaulted on their margin calls. Source Bloomberg
Woman with Failing Kidneys and Heart Receives GM Pig Organs: People with heart failure may be eligible to receive a heart transplant; people with kidney failure may be lucky enough to receive a kidney transplant. But for many people with both heart and kidney disease—who may be ineligible to be listed for a transplant or cannot receive both organs in time—options are extremely limited. Scientists at NYU Langone Health in New York City, however, have now completed a first-of-its-kind procedure involving surgery to install a left ventricular assist device (LVAD), or mechanical heart pump, followed by transplantation of a genetically modified pig kidney. It is the first time someone with an LVAD has received a transplant of any kind (except for a heart transplant to replace the device) and only the second time a genetically modified pig kidney has been transplanted into a living person. There is enormous demand for kidney and other transplants but not nearly enough donor organs available. In the past few years, however, scientists have made significant progress in transplanting organs from nonhuman species to humans, known as xenotransplantation. Pisano has so far shown no signs of acute immune rejection. The critical point for that may come around a month after surgery, however, Montgomery says. For now, he and his colleagues are continuing to monitor her closely. Source Scientific America
President Signs Off on TikTok Bill: President Joe Biden signed a bill forcing the divestiture of TikTok from Chinese parent ByteDance. If ByteDance doesn’t sell TikTok, the app could face a ban in the U.S., affecting the scores of online creators and influencers whose livelihoods has been suddenly thrown into potential chaos. TikTok allows small businesses and creators to find their people in their community, Ophelia Nichols, known as “shoelover99” told CNBC ahead of the bill’s signing. It gives everybody the opportunity to be able to provide for their family in a way that they have probably never provided for their family before. It has changed people’s lives. Keep in mind, a ban could take years, as TikTok vowed to challenge it in court. But in the meantime, there’s a lot of uncertainty. Small and medium-sized businesses that used TikTok supported 224,000 jobs in 2023, according to an Oxford Economics study paid for by TikTok. These businesses generated nearly $15 billion in revenue and contributed $24.2 billion to the U.S. gross domestic product in 2023, the study said. Source CNBC
Halloween in April? It may be April, but it's not too early to think Halloween at Home Depot. The home improvement store chain is the first major retailer to push out fall holiday decor, doing it months ahead of summer and even earlier than last year. Starting sometime today, Home Depot said it will hold its first-ever "Halfway to Halloween sale" online, with select items from its 2024 Halloween lineup, including its 12-foot skeleton. Even though Halloween is more than six months away, Home Depot expects some items to sell out quickly. Source Axios
Coffee Drinking in US Hits Record High: The number of American adults who have had coffee in the past day has increased by +37% since 2004, putting past-day coffee consumption at its highest level in more than 20 years, according to the National Coffee Association (NCA). The group’s Spring 2024 National Coffee Data Trends (NCDT) report eveals that 67% of American adults had coffee in the past day (more than any other beverage, including tap or bottled water), compared to 49% in 2004. 75% of American adults have had coffee in the past week, up by 4% since the Spring 2023 NCDT. Increased past-day coffee consumption is driven by consumers ages 25+. The greatest increase is among consumers 60+, whose past-day consumption increased by 9% (from 67% to 73%). Consumers aged 25–39 and 40–59 both saw consumption rise by 4.5% (from 67% to 70% and from 66% to 69%, respectively). Consumption by 18–24-year-olds held steady at 47%. Source NCA
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